Mind the Gap

A new Discussion Paper ‘Mind the Gap – Housing Supply in a Cold Climate’ by David Pretty CBE and Paul Hackett for the Smith Institute and PricewaterhouseCoopers LLP and published by the TCPA, was launched at the Political Party Conferences 2009.

Summary of the report:

An adequate supply and choice of good quality housing is vital for our economic and social wellbeing. However, in recent decades we have fallen well short of providing anywhere near the number of new homes needed. Indeed, the gap between housing demand and housing supply in England has widened, especially for affordable homes. The shortfall is now set to get much worse.

With housing production at an 80-year low, the housing supply backlog is likely to approach 1million by the end of 2010. This unprecedented level of under-supply has serious social and economic consequences, not least pushing up housing waiting lists and overcrowding to record levels. The lack of new homes will hamper economic prosperity, exert considerable upward price, exacerbate wealth inequalities, constrain public service delivery, and thwart homeownership.

As a result of the mortgage famine and the economic downturn, housing completions in 2009 are likely to be under 100,000, a 40% drop from its recent peak. While housing supply has fallen, demand has increased. We now need to build at the rate of at least 250,000 new homes a year to match annual population growth, and even higher to replace our ageing housing stock and the accumulated backlog. The supply-demand shortfall for 2009 alone (excluding the backlog) is likely to be around 150,000 homes – equivalent to the size of Nottingham).

The housing market is showing early signs of recovery and house prices could return to 2007 levels within five years. But, because capacity in the housing sector has been dramatically reduced it could (without sustained public intervention) take at least seven years for housing production to get back to pre-slump levels, let alone match housing needs.

The Government has reacted quickly to the housing crisis, and its emergency ‘Kickstart’ programme is helping. But, more action is needed to help boost supply and ensure that we continue to build more sustainable homes in mixed communities, not mono-tenure housing of the past.

Whilst there are no quick fixes, the Government (and its main delivery agency, the Homes and Communities Agency) should consider:

Maintaining public interventions and investment in both private and affordable housing at current levels. Cuts in the total housing budget (which support new supply) risk creating a major housing crisis at a time when the economy is starting to recover.

More action to boost mortgage availability and help to credit- worthy buyers (especially first time buyers (FTB)), including a new National Home Deposit Saving Scheme and extending stamp duty thresholds for FTBs only.

More land release and better management of land supply to increase the supply and variety of new homes and to reduce the percentage of apartments in future output. It is important to protect greenbelt and maintain brownfield targets, but there will be a need for the release of more greenfield sites.- especially in high demand areas

Accelerate the release of public land and make more land available for the creation of new public-private housing delivery vehicles.

Greater support for local authority land deals (where councils offer land at low cost or in lieu of a share of a development) and help with establishing new Local Housing Companies and other joint ventures

Improve the planning applications process, along the lines of the recent Killian Pretty review, including extending the period for existing planning consents. Avoid any major planning reforms which would create uncertainty and disrupt supply.

Easing the impact of regulation through support for rescheduling Section 106 agreements and adjusting the housing tenure mix to improve variability. Also review ways of easing the impact of future regulations on new housing supply.

Further support to grow the private rented sector, including new tax incentives to increase institutional investment and support for alternative new housing models, such as community land trusts

Ensure that councils have the skills and expertise they need, for new council building, and that production of council homes is additional and not at the expense of housing association s or private output.

Enable councils to secure rental incomes from new build (and future sales to private buyers) to support the use of new funding models, such as Accelerated Development Zones and other tax incremental financial schemes.

Recent proposals on dismantling the Housing Revenue Account could provide extra funding for new build, although much depends on the scope of the reforms and how housing debt is reallocated.

Write off part or all of the Social Housing Grant, perhaps linked to investment by housing associations in new intermediate housing.

Strengthen the role of the HCA in risk sharing partnerships and co-funding of new financial tools to support housing led-growth.

Encourage new entrants through tax incentives or special land deals, including extra help to the emerging self build sector.

Government to resource a major campaign to inform and raise awareness about the need for major new settlements and more new housing generally.

The analysis, commentary and recommendations in this report are predicated on a series of discussions with over 100 senior representatives from across the housing sector.